OnLive reboot still leaves too many questions unanswered

Over the past few days, details of OnLive’s restructuring have been trickling out. You can catch most of the latest details here, in Troy Wolverton’sstory from Monday. While OnLive has answered some questions after word began leaking out, it still hasn’t answered enough. It has to do more if it wants to maintain the trust of investors and users.

I’m giving them a little rope here to do just that. In part, that’s because this is a company and technology that I’d like to see make it.

While I’m not the world’s biggest gamer, I started playing with OnLive back in its alpha phase. The experience has always been great. And in particular, I like the fact that in an era of small, copy-cat ideas masquerading as innovation, OnLive had a big idea. It wanted to disrupt the whole notion of playing games through consoles, delivering games via the cloud.

In my mind, OnLive is a company worth rooting for.

But that sentiment took a hit these past few days with the mysterious process the company has used to restructure.

Wolverton explains:

“As part of the proceeding — called an assignment for the benefit of creditors — all previous OnLive shareholders, including its employees and founder Steve Perlman, lost their stakes in the company and OnLive laid off all its employees, the company said in a statement released Sunday.

The newly formed company that acquired Palo Alto-based OnLive’s assets will operate under OnLive’s name, continue to offer its services and operate its game service and has offered jobs to nearly half of the company’s former employees.”

That assignment is not unprecedented, though it’s certainly not the typical bankruptcy process. A bankruptcy can be slower, bit it’s also more transparent. The assignment process used by OnLive has left too many questions unanswered.

In an email to Wolverton, Gary Lauder, whose Lauder Partners has provided financing to the new company, failed to provide key details:

“In the OnLive restructuring, its technology, intellectual property and other assets were transferred to an assignee and then sold to a third party — the new OnLive. In the email, Lauder declined to say how much the new OnLive paid for the old company’s assets. He also declined to say how much money he invested in the new company, saying only that it has ‘more than enough (funding) until it has additional investors.’ OnLive has also not disclosed the assignee.”

That’s not acceptable. Not to former investors, employees who poured their hearts into making this thing work, or players who supported OnLive (even if there weren’t enough of us).

If Lauder and the new owners of OnLive want our trust and support, they need to provide a stronger accounting of how this deal went down, how much money changed hands, and who owns and runs this thing.

If the new owners aren’t willing to be more transparent, then there will continue to a cloud over how this whole deal went down. And in that case, players, I think, will be even less likely to get on board with a company that hasn’t earned their trust.

Why do we need these answers to trust the company? It’s been settled, the service will continue, and they are sure that there’s “more than enough funding” there. That’s good enough for me… Exactly how much money Lauder bought Onlive for is unimportant. It’s been reported that Steve Perlman remains remains chief executive. Lauder bought it so he “owns” it now, although I’m sure most of the work will still be done by Perlman: the actual entrepreneur.

I agree with Chris, this all seems very shady, and it does make me think twice about continuing to use the service. The old OnLive showed that they weren’t dependable, taking millions of dollars from their investors and losing it. The new OnLive hasn’t given me any reason to think that they will protect my $50 investment if I buy a game from them rather than on any of the many competing, more dependable platforms. Despite the many qualms I have with Sony, at least if I buy a game for my PS3 I can be sure I’ll be able to play it a year from now…